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5. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor's portfolio.
In accounting and finance, equity is the difference between the value of the assets and the cost of the liabilities of something owned. For example, if someone owns a car worth $15,000 but owes $5,000 on a loan against that car, the car represents $10,000 equity. Equity can be negative if liability exceeds assets.